When a company declares a dividend as of a given date, can you buy shares the day before and get the dividend?

Question

If a company says that shareholders as of 9/1/06 will get paid a dividend on 10/1/06, can you buy the shares on 8/30/06 and expect to receive the dividend? What happens if you sell 9/25/06, do you get paid the dividend?

Answer 1

There are a couple important dates for dividends. You have the declaration date, the ex-dividend date and the payment date. Since stock trades normally clear T+3 (ie you buy the stock today and it will be put into your account 3 business days from now) you have to buy the stock at least one day before the ex-dividend date which is two days before the holder of record date. On the ex-dividend date, the stock will be adjusted downwards automatically by the amount of the dividend. For example if a stock declares a dividend on July 21 for holders of record on August 10th, you'd have to buy the stock august 7th or before to get the dividend. On august 8th the stock will trade ex-dividend or "without" the dividend and you will not receive it. I hope this wasn't too confusing.

P.S. There are no studies, I worked on the NYSE for the last 4 years. On the ex date, the stock, all GTC buy limits and all GTC sell stop orders are lowered automatically by the exact amount of the dividend. This is done by the exchange.

Answer 2

The answer to all of your questions is "Yes."

When a company declares a dividend there are two important dates. One is the ex-dividend date and the other is the date that the dividend is paid. The Ex-Dividend is the date that the stock starts trading without the dividend. In your example, if you buy or sell on or before 9/1 -- then you will get paid the dividend. Whoever is the owner of record when the market closes on 9/1 will get paid the dividend. The stock starts trading ex-dividend the next day. Anyone who buys on this day (or later) will not get paid a dividend. Because of this, the stock price usually drops by the value of the dividend.

Answer 3

No, when a company declares a dividend, it is said to be "ex dividend" and any shares purchased then will not be eligible for the dividend. In other words, any one holding stock on the ex dividend date are eligible to get the dividend.

Answer 4

Yes, you will get the dividend. However, studies have shown that on average, stocks drop in value on their ex-dividend date at approximately the amount of the dividend. So it's hard to make money this way.

Answer 5

Hi !!
Actually that share should be transfere to your name before that date.
Have healthy investing !!!